Sometimes clarity emerges from a crisis. As Americans brace for health consequences, they are just as worried over the economic disruption ahead. You simply cannot order a halt to the nation’s productive capacity and not expect inevitable ramifications. Yet politicians and pundits seem fixated on shelter-in-place policies and yet another "stimulus" plan to save us.
I am not opposed to a temporary economic buffer. After all, the government got us into this, it should help alleviate it. Getting families through the next few months with readily available emergency care, penalty-free withdrawals from retirement accounts, and early tax rebates and a filing delay is reasonable. Moreover, avoiding the dangerous contagion of a liquidity crunch by quickly opening direct lines of credit for cash-strapped businesses seems warranted as well.
But the only thing that will get the "animal spirits" going again is to defeat the virus through advances in science or our own herd immunity—not by closing down the greatest economy in the world. Every American now intuitively understands that government can’t create demand when there’s nothing to buy.
Ask anyone waiting in line for empty shelves at Costco.
It is the supply-side that has always had the "pride of place" in our circular economy. Call it Say’s law or whatever you want, but in this present crisis there’s little need to get into the intricacies of economic jargon. Americans want to go back to work because they produce wealth—not government spending.
By 1938, after years of an unprecedented New Deal “stimulus,” the unemployment rate had rebounded to nearly 20%, prompting FDR’s own Treasury Secretary, Henry Morgenthau, to lament, “We are spending more than we have ever spent before and it does not work…we have just as much unemployment as when we started…and an enormous debt to boot."
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Repurposing the “arsenal of democracy” during World War II helped, but only if you ignore the forced rationing of food, shoes, typewriters, fuel and cars. No, it wasn’t until the private economy took over and Washington slashed spending and regulations that the post-WWII boom ensued.
Right now, it matters less whether the politicians want guns or butter—what matters is whether we’ll have either. Without putting Americans back to work, no Keynesian “multiplier,” no “stimulus,” no “bailout,” and certainly no “MMT” will save us.
And certainly not with a $24 trillion debt.
Besides, policymakers have no choice as it is next to impossible to enforce a law that people won’t follow. From prohibition to speed limits to closing businesses, sooner or later freedom-loving Americans will rebel.
There is now a growing body of evidence on two major fronts. 1) younger people are not falling seriously ill, and 2) antiviral therapies are emerging that show great promise for the currently ill. Nothing is certain, but only politicians can wait for 100% ontological certitude before acting. Meanwhile, it’s the rest of us who may discover the cure was worse than the disease.
We also know the Wuhan virus is disproportionately concentrated across the country. While the federal government has responsibility over national borders, which must be secured, state and local units of government must be free to act on local data.
Therefore, those states, like Minnesota, where the outbreak is far less threatening should be open for business for the vast majority of its working age citizens while protecting its most vulnerable. Just as important, the federal bureaucracy should get out of the way and approve antiviral therapies for anyone who wants them.
Not allowing people to earn a living or provide for their families so as to not overwhelm extant medical facilities says more about recent changes to our health care system than it does about disease. Flattening the curve doesn’t beat the virus, it only delays it.
Some are unfortunately portraying fighting a virus and getting Americans back to work as a binary choice. It is not--you can't do one without the other. So, let's get started.